Keeping financial records

At Sterling Associates we can advise businesses in the Elstree area on keeping financial, tax, accounting and other records. Here are some of the key points.

Every business needs to have a good record retention policy. Failure to retain documents for the use of HM Revenue and Customs can result in significant fines. Other records which have no statutory retention period may be essential in later years for historical or research purposes.

Either way, you must ensure that you manage your business documents effectively, and, above all, that you keep the right ones.

Which records should be kept?

The documents that should be kept will vary from business to business, according to size, status and in some cases, personal preference. Some items should be kept permanently, such as deeds and title papers, accounting ledgers, incorporation documents and all of the business's statutory records. Others can be discarded after allocated periods of time. The following is not an exhaustive list, but a rundown of common records that will be relevant to the majority of businesses.

Tax records

All business records must be kept for five years from the last date by which the relevant tax return was to be filed. But remember, this is only the minimum statutory requirement. You may wish to keep records for longer periods.

As a taxpayer, you will need to keep all documents related to money received and expended in the course of business, and any records concerning dealings in goods in the course of trade.

Amounts paid into the business, such as loans and grants from personal sources.

You may also wish to retain personal financial papers for a similar time.

VAT records

VAT records must normally be kept for six years after the current date. Relevant records include:

VAT accounts

Annual accounts, including profit and loss accounts

Orders and delivery notes

Purchase and sales books

Relevant business correspondence

Cash and other account books

Purchase and copy sales invoices

Credit/debit notes issued or received

Bank statements and paying-in slips

Import and export documents

Accounting records

Records used to compile annual accounts normally need to be retained for two to three years. Annual accounts that have been audited should be kept permanently.

Wages and personnel records

Documents related to wages, such as P45, must be retained for six years. Records of income tax, pay details and payroll, as well as national insurance contributions and annual earnings summaries should also be kept for this period.

A confidential personnel file for every employee should be maintained. This will include such items as personal details, application forms and offer letters, national insurance number, payment details and holiday/sickness information. For legal and reference purposes, this file should be kept for seven years after the end of the person's employment. You might also include medical records, accident reports, expense accounts and overtime details.

Other useful records

It is often useful to keep some commercial records for reference purposes. For example, old contracts, customer orders, enquiries and other correspondence could all be useful when drawing up statistics, dealing with comparable new customers or renewing a relationship with an old client.

Press cuttings, adverts and company newsletters can all be helpful for creating a company image and branding purposes. It is up to you to decide how long these records are kept.

It is a good idea to draw up a timetable for the retention of documents for your own business. Below is a typical example:

Sample Record Retention Policy

Permanent records

Deeds/title papers

Register of members

Accounting ledgers

Incorporation documents

Audited annual accounts

Insurance records

Pension scheme records

Long term (6 years +)

VAT records

Wages records

Tax records

NICs records

Personnel files

Payroll records

Medical records

Personal financial papers

Short term (up to 6 years)

Other accounting records

Company newsletters

Press cuttings

Accident reports

Adverts

Old contacts, orders etc

If you are in the Elstree area and would like advice on keeping financial records, contact Sterling Associates.